Selective Hiring and Welfare Analysis in Labor Market Models
AbstractFirms select not only how many, but also which workers to hire. Yet, in standard search models of the labor market, all workers have the same probability of being hired. We argue that selective hiring crucially affects welfare analysis. Our model is isomorphic to a search model under random hiring but allows for selective hiring. With selective hiring, the positive predictions of the model change very little, but the welfare costs of unemployment are much larger because unemployment risk is distributed unequally across workers. As a result, optimal unemployment insurance may be higher and welfare is lower if hiring is selective.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6294.
Length: 29 pages
Date of creation: Jan 2012
Date of revision:
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Other versions of this item:
- Christian Merkl & Thijs van Rens, 2011. "Selective hiring and welfare analysis in labor market models," Economics Working Papers 1277, Department of Economics and Business, Universitat Pompeu Fabra, revised Jan 2012.
- Christian Merkl & Thijs van Rens, 2012. "Selective hiring and welfare analysis in labor market models," Working Papers 570, Barcelona Graduate School of Economics.
- Christian Merkl, Thijs van Rens, 2012. "Selective Hiring and Welfare Analysis in Labor Market Models," Kiel Working Papers 1752, Kiel Institute for the World Economy.
- E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution
- J65 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment Insurance; Severance Pay; Plant Closings
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-02-20 (All new papers)
- NEP-DGE-2012-02-20 (Dynamic General Equilibrium)
- NEP-LAB-2012-02-20 (Labour Economics)
- NEP-MAC-2012-02-20 (Macroeconomics)
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- Régis Barnichon & Andrew Figura, 2010.
"Labor market heterogeneity and the aggregate matching function,"
Economics Working Papers
1395, Department of Economics and Business, Universitat Pompeu Fabra, revised Sep 2013.
- Regis Barnichon & Andrew Figura, 2013. "Labor Market Heterogeneity and the Aggregate Matching Function," Working Papers 727, Barcelona Graduate School of Economics.
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